Another acquisition for the fast expanding Falkirk based The Key Place

The Key Place, the "go to letting agency" across Edinburgh and the Lothians, Central Scotland and the Scottish Borders, specialising in property management and buy to let investment, is delighted to announce that it has taken on PH Young’s letting business based in Bo’ness.

Robert Young, The Key Place’s Chief Executive, commented “We are delighted to have taken on PH Young Lets as, on top of it being an excellent, well run business, it enables us to consolidate our strength in property lettings across Central Scotland.  I can see this being the first of many acquisitions that we make over the next couple of years and, with the regulation coming into the sector next year, I expect that a fair number of property letting agencies will be looking to exit the market rather than go through the hassle of becoming regulated.” 

Are ‘would be’ Falkirk homeowners warming to the idea of renting?

I was reading a report the other day produced by the Halifax, about the UK property market and why more and more of the younger generation seem to be renting rather than buying. I find it fascinating that over the last 10 - 15 years, the British obsession of buying a house almost as soon as you left school, and the fact that if you rented you were seen as a second class citizen, has turned on its head to a point where the hopes and dreams to own a nice home will be replaced by the ambition simply to live in one.

In the latter half of the 20th Century, you left school, got a job, bought a small house and kept buying and selling property, constantly upgrading until eventually they carried you out in a box. However, the perceived shame and stigma of renting is no longer the case, as it seems that the British are now beginning to accept a lifetime of renting. This is a very important consideration for both Falkirk homeowners and Falkirk landlords as it will transform the way the Falkirk property ladder looks in the future and I might ask whether or not it will exist at all for some people? The make up of households is one important factor, especially in the Falkirk property market. The normal stereotypical married couple, two kids and dog of the 1970’s and 80’s has changed. More and more we have the need for larger houses where two families come together after divorces (+ kids) and need a property to house everyone through to an increase in the number of one person households.

Looking at the data for Falkirk, of the 4,644 private rental properties in the Falkirk Locality, 27.6% of those rented properties are one person households (1,282 properties). However, when we compare the number of one person Falkirk households who have bought their own property with a mortgage (i.e. therefore they are still in work), of the 23,816 owner occupied households with a mortgage in the area, only 1,796 of those properties are a one person household (i.e. 7.5%). Compared to a decade ago, this explosion in demand for decent high quality rental properties that one person households require has not been met with an increase in supply of such properties.  More and more I believe Falkirk landlords need to consider this change in the make up of Falkirk households, as I believe this could be an opportunity.

It is true that the Government’s introduction in 2013 of the Help to Buy scheme, where first time buyers only needed a 5% deposit, changed the perception of peoples’ ability to buy without having to save ten’s of thousands of pounds for a deposit. However, it might surprise you, 95% mortgages were re-introduced within six months of the Credit Crunch in late 2009, so again it comes down to people’s own perception. Many youngsters think they won’t get a mortgage, so don’t even bother trying.

Coming back to the deposit, it’s still a fact that once you start renting it becomes that much harder to save for a deposit, regardless of the size. Interestingly, 7 out of 8 renters polled by the Halifax (86% to be exact) refuse to sacrifice the quality of accommodation they currently live in to reduce the amount of rent they pay in order to save for a deposit.  This is the crux and the real reason why people aren’t buying but renting... and why demand for renting will continue to grow in the future (i.e. good news for landlords). Falkirk tenants can upgrade the quality and size of the property they live in for a minimal rent increase. The average rent of a one bed property in Falkirk is £395pm, but a two bed is only £90pm more at £485pm, whilst the average three bed rent is £640pm. If you had to make that jump when buying, the monthly mortgage payments would be stratospherically more than that! Without any social pressure and better quality rental properties compared to a decade ago, we will become a nation of renters within the next generation, as the UK is becoming more like Europe, where renting is ‘the norm’.

Who is going to supply all these properties to rent? Landlords! Whether you are an existing landlord looking to grow your portfolio or looking to become a ‘first time landlord’, my thoughts are take advice from as many people as possible. However, as the majority of landlords buy their buy to let properties in the same town they live, you will need specific advice about Falkirk itself.

One place for such quality advice and opinion is the Falkirk Property Blog www.thefalkirkpropertyblog.co.uk.

www.thekeyplace.co.uk

  

#falkirk #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector #firsttimebuyers

Home Buyers in Falkirk – Beware the Cost of 90% Mortgages

There are an increasing number of lenders willing to grant 90% mortgages to first-time buyers, but that doesn’t necessarily mean you should jump in without exhausting other possibilities.

You see, the cost of a 90% mortgage to first-time buyers compares quite poorly to those with a deposit of 15% or more; so much so that it could actually be beneficial to take out a separate loan to cover the difference.

Currently a first-time buyer with a 10% deposit can access a two-year fixed mortgage at a rate of 1.79%. Whereas having a 15% deposit in place would lower the rate on the same product to just 1.27% (meaning there’s 29% less interest to pay!).

If you’re reading this thinking a 0.5% difference in interest rates is negligible and all the mortgage rates seem very low, you’re right! But it can still make a real difference in the long-term.

Let’s say you’re thinking of buying a £125,000 house with a 10% deposit. On a repayment basis, you can expect to pay £465 each month towards the mortgage. But by raising your deposit to 15% those repayments would drop to £413 per month OR if you paid the same £465 a month as you were going to, the mortgage would be paid off three years quicker!

You may think you have little choice; and with the average property in Falkirk selling for £148,909, even a 10% deposit will require £14,890! But if you consider that by borrowing the additional £7,445 to step up to a 15% deposit could save you £62 per month in this scenario, you could actually afford to borrow this sum at 10% (interest only) to be no worse off. 

So even though the interest rates on a personal loan might be higher than a mortgage, the shorter length of the loan means you’ll pay it off quicker. This will boost the level of equity in your home, which will help when re-mortgaging in the future and could save you money in the long-term. However, and it is a big however, certain mortgage lenders take a dim view about this sort of thing.

I’m not saying you should borrow more to stretch yourself and this certainly doesn’t constitute financial advice (you should consider contacting the registered professionals for that). But, I would urge you to ensure you’re accessing money as cheaply as possible to future-proof yourself and keep more money in your own pockets rather than in the banks coffers!

And, of course, there is another alternative although I appreciate that this is an unpopular thing to say .... give up some of lives ‘less essential’ ‘essentials’ and save the greater deposit.

www.thekeyplace.co.uk

#falkirk #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector #firsttimebuyers #90%mortgages #95%mortgages

Opinion piece: The Key Place, Countrywide, Purplebricks and the changing lettings landscape in Falkirk

The lettings landscape is changing. 

It is changing as a result of the regulation of the sector being implemented by the Scottish Government.  It is changing because of the recent tax changes introduced by that historical figure, George Osbourne .... remember him?  It is changing because of the changing mortgage market.  And it is changing because of technology advancements.

Fundamentally, even with all this change, the lettings market is still a good place to be just now because current demand greatly exceeds current supply and this shows no sign of changing in the short, medium or long term as the obstacles to building more properties are so high that we will not be building enough properties to solve the problem for decades to come.

However, what will evolve is who manages letting properties and how they are managed.

At the moment there is great talk of national internet based letting agencies, like Purplebricks and Ewemove, being the next great thing and there is lots and lots of talk that large national office based letting agencies like Countrywide (called Slater Hogg & Howison in Scotland) being dinosaurs who will not survive (for what it worth, I personally suspect that Countrywide may well be more valuable if it is broken up .....). 

For me, technology will change the lettings market and the lettings industry must embrace technology so that it provides a continually improving service.  However, unlike selling tins of beans (which absolutely lend themselves to be sold by national and international businesses on the internet), ultimately lettings is about local knowledge and long-term relationships and personally I do not think that national letting agencies – whether internet based or not – can provide the same level of local knowledge, people skills and long-term relationships as local letting agencies like The Key Place.  The Key Place is a family run business with extensive local knowledge, people skills and long-term relationships with landlords, tenants, contractors, Councils, Falkirk etc which is invaluable in ensuring that lettings is done properly .... particularly when the ‘road bumps’ of lettings come along.

Keep it real, keep it local!

www.thekeyplace.co.uk

#falkirk #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector #firsttimebuyers

Falkirk First Time Buyers – here are some helpful hints

If you are planning to buy your first home, you’re probably filled with a mix of excitement and, let’s face it, fear. This is a big, big commitment and you don’t want to get it wrong. You certainly didn’t spend all that time saving for your deposit just to throw it away on a few bad choices.

Buying a home is not easy, even for those who have done it before. Here of some of the things you may not have thought about but which could make the entire process go a good deal smoother.

Widen Your Choices

We often want to live in a certain area, either close to work or near to friends and family. Looking further afield, however, and really checking out the house prices can make a significant difference. For some, it can mean choosing between a cramped flat or a three-bedroom house for the same amount of money. Ideally, you want to search for an area that is on the up and up – somewhere that could be a great catch for new buyers in the years to come.

Choose Your Estate Agent Wisely

Don’t settle on the first estate agent you come across – look for someone with experience who is going to work with you and get you the best deal, not just protect their own commission. Ask for recommendations or check out estate agent review sites. AllAgents is a great place to start.

The Benefits of a Mortgage Broker

You might think getting a mortgage is simply about approaching your bank and asking for the loan. Mortgages can be a minefield and you want to choose the right one for your needs. A broker might seem like an added expense but they can save you from making the wrong decision. The rules are a little tighter now when it comes to mortgage lending, so a good broker is the best person to advise you on what will work and what won’t.

Learn Your Survey from Your Property Search

One pitfall new buyers often fall into is not understanding the difference between the solicitor’s property search and a home survey. The first includes all legal documentation about your property such as land checks. The second looks at the condition of the property and whether there are any expensive problems such as damp or damage that you should be aware of. They are both important.

Don’t be in a Rush

With so much competition from other buyers, you might be tempted to put in offers and get things signed, sealed and delivered as quickly as possible. It is important you love your new home, but getting carried away and rushing in could end up in tears. Bear in mind that this is going to be one of the biggest investment you make in your life and as much as a particular house may be “perfect” try to stay level headed.

Buying a house can be a long process and there are many different strains and stresses that will crop up during that time. If you are renting don’t hand in your notice until you are 100% sure that things are going through. There can be various delays, most of which you don’t have a control over.

As the old saying goes: Grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.

Get Covered

Finally, when the choice has been made make sure that you sort out not just your buildings insurance but your contents cover too, making sure your valuables are covered during the moving process.

www.thekeyplace.co.uk

#falkirk #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector 

Trend towards multiple property owning Falkirk landlords

I am seeing a couple of trends amongst our Falkirk landlords – both understandable and, I suspect, likely to continue. 

On the one hand, the more serious landlords are investing and buying more properties on the basis that, despite the recent changes and hassles in the Private Rented Sector, buy to let property investing is an attractive proposition. 

However, on the other hand, the ‘hobby’ or ‘accidential’ landlords are throwing up their hands in horror at these changes and are selling their properties.

It was interesting for me to have this anecdotal trend borne out by evidence. 

Whilst the number of rented properties across the Country is increasing from 4.9 million in 2015 to 5.1 million in 2017, the number of landlords across the Country is falling from 3.72 in 2015 to 3.72 in 2017.  This means that the size of the average landlord’s portfolio is 1.44 which is the highest level it has been since records began in 2005 up from 1.33 in 2015 and a low of 1.24 in 2010 (presumably due to the affects of the financial crash).  Another interesting stat is that in 2017, 73% of landlords owned one buy to let property which is a far less that the 86% it was in 2010.

So, what do you need to think about when you get into owning multiple buy to let properties.

Firstly, it is often more profitable and less risky to buy a number of properties than just one for the same outlay.  Not only that it gives you more flexibility and reduces the effects from voids; your risks are therefore reduced too.

If only one property is purchased a void period will result in no income for the investor.  However, if multiple smaller units were acquired the effect of one property being unoccupied is proportional to the number of properties held and a return on your investment will still be maintained.

Additionally, the overall achievable rental return is likely to be significantly higher across a portfolio of several smaller properties rather than a single investment in a larger one. In Falkirk, for example, rent from one £300,000 property would be £1,000 pcm but from 3 x £100,000 properties it could be over £1,700 pcm.

Time it right

In general there is upward movement in all aspects of the housing market and this makes property an excellent choice to consider for investment.  Your return on your investment is a mixture of yield from rent and capital growth, perhaps 6% and 3% respectively, so a potential annual ROI of 9% gross.

Maximise your profit potential by adding to your portfolio when property prices are rising, but aren't running away. In Falkirk we're currently experiencing a fairly 'flatish' sales market with prices increasing but not at an overly accelerated rate. Perhaps this is the future, but a steady 3 – 5% growth is healthier than boom and bust.

In addition, it's important to review the rental market as well.  Indicators of good timing for growing your portfolio would be when there's competitive tenant demand and rents are on the up (as this will automatically increase your yield).

Plan and prepare

The solid foundations of property portfolio success are often down to advanced planning and precise preparation…

Before investing you need to have your finances in place, plus you will need to have an overall long-term plan.  Taking advice from a qualified financial advisor as how best to fund purchases is essential.

It's important to identify why you're investing in an additional property and what you want that property to achieve.  For example, is it for a pension?  Are you hoping to increase your monthly income?  Is it for a long-term capital growth to use in the future?  Are you planning to live at the property in the future?

It's also essential to know when (and how) you're intending to exit the investment so that a clear and concise exit strategy can be prepared. Again talk to a financial advisor and tax expert before committing to portfolio growth so you can plan how to exit in the most cost-effective way.

Starting the search…

Although there is likely to be a multitude of properties available for purchase in your area not all of them will make the best rental investments so it's important to choose carefully.

When searching for your next investment, short-list several properties taking into consideration the following for each: location, price, potential renovation costs, suitability for the rental market, timescales before being rental ready, tenant demand, achievable rental return, potential for capital growth, plus where it will fit in with the rest of your portfolio. 

I am happy to have a chat with you before you start your search and/or once you have got your short-list.  Not only do I know the local property market but I also know what tenants want and need from a property, what's in demand and which type of properties are likely to be successful for investment purposes. In fact, as risk indicators are sometimes overlooked by those searching for a purchase, I can tell you what's wrong with a property as well as what's right.

Overcoming challenges

Of course having multiple properties isn't without its challenges.  Each element of the rental process will be multiplied… doubled, tripled, quadrupled etc.

Not only will you be dealing with the paperwork and maintenance of a number of properties, you will also be juggling the management of the people who live there, all of whom will have their own demands and needs.

Bear in mind too that there are new financial challenges. We're in year one of a four-year process to drop tax relief for landlords, plus an extra 3% Stamp Duty now has to be paid for each property bought for rental purposes.

So, how can a landlord make juggling multiple properties simpler?

By far the easiest way to manage an expanding portfolio with ease is to engage the help of a property management agent.  As industry experts they will thoroughly vet potential tenants, troubleshoot emergencies and issues and arrange necessary maintenance utilising our bulk buying power with our regular contractors.  They also understand and meet the current legislation, plus will keep on top of essential anniversaries, such as gas safety certificates.

All of the above becomes increasingly harder for a self-managing landlord as their portfolio multiplies but, if you engage the services of a property management agent, your involvement will be minimal.

Watch out for further information on this in future posts on The Falkirk Property Blog.

www.thekeyplace.co.uk

#falkirk #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector 

Energy efficiency in Falkirk private rented properties – dull but important stuff!

As some of you will no doubt be aware the Scottish Government is conducting a consultation regarding energy efficiency and condition standards in private rented housing.  Details of which can be found by clicking here.

The Scottish Association of Landlords has submitted its ‘generic’ response to the consultation.  Details of this can be found by clicking here.  I have submitted my own as a landlord/letting agent.

We are all busy people but I would encourage you to have a look at what is proposed if you can find the time and possibly respond to the consultation – it is online and not too onerous.

Without boring you to death, the bottom line is that for a variety of reasons including Climate Change and Fuel Poverty, the Scottish Government has put in place a policy that requires all Private Rented Housing in Scotland to meet a certain standard of energy efficiency as measured by the Energy Performance Certificate.

This consultation is not about whether this will happen, but rather how and when.

In its most basic form, all rented properties will need to achieve at least an EPC level E initially and subsequently an EPC level D rating within a timeline that is to be set.

There is no need to panic, I will just repeat that..... Don't Panic.

Worst case, assuming the consultation is adopted wholesale, we have until April 2019 before properties let from that date on ‘new tenancies' need to achieve an EPC rating of E and by end of March 2022 for all properties. After which we have until the end of March 2025 for all properties to achieve an EPC rating level D.

Those of you who are ‘regular’ readers of my blog will notice that I have started mentioning the EPC rating of potential ‘buy to let’ properties where appropriate, this legislation is the reason why.

So having given some background and the bad news, is there any ‘good’ news?

On the plus side, the current proposal does include a cap on the expenditure of £5,000 per property (not massively great news I accept). Most properties, we hope, should be able to meet the requirements at a much lower level of expenditure than this.

Additionally, we have been told that there will be ‘some' funding available (no details as yet) in terms of grants, interest-free loans etc.

I would suggest is that any landlord who has concerns should start exploring alternatives fairly soon.

You might consider the following:

• Identify if your property needs upgrading to meet the standard.
• If it does, have a look at the full EPC report as they usually give some guidance on energy efficiency measures. Whilst I suggest that you take this guidance and the projected costs/savings with a truck load of salt, they are a start.
• Explore all the possibilities for energy efficiency but ensure you get ‘expert’ guidance and written quotes for the different types and their efficiency. The range of insulation, heating, energy efficiency products that are available now is staggering and it’s only getting bigger as ‘energy efficiency’ becomes more and more of a focus.
• Explore the funding situation to see what's available. Some companies that specialize in ‘energy efficiency' works will assist with this and/or will often have a good handle on what might be available. Additionally, some will throw in a post works EPC (which is required to evidence the improvement in the EPC rating) for free.
• If you are going to get work done then allow for disruption, discuss it with your tenants and/or try and plan it for when there is a void period. Maybe combine it with other works you may have planned.

To give you an idea of the kinds of ‘technologies’ that are available here are some examples, with links to some providers. This list is by no means exhaustive and you might try to check out the Energy Savings Trust Scotland website by clicking here. 

I would emphasize that these aren't companies I have used and I am merely providing their details as examples. It is for you to decide whose services you employ bearing in mind that, which technologies or improvements will have the greatest impact on any given property, will depend on a variety of factors and so need to be considered on a case-by-case basis.

• Heating – obviously installing gas central heating is a big improvement but also a sizeable cost and that’s assuming gas is available. However, even if that’s not an option, the range of modern electric heaters that are highly efficient and cost effective is massive. From simple panel heaters to gel, water or oil filled alternatives even modern versions of the venerable storage heaters. I have gel filled in one of my own properties and the tenants are very happy with them and they are a quantum leap up from the old ‘storage heaters’.
• Insulation – there are numerous options depending on the construction of your property and how much you want to spend. As well as the usual loft and cavity wall insulation there are internal/external cladding systems, sprayable options etc. A couple of examples are: (i) ScotFoam – sprayable insulation and noise reduction, great for getting into spaces that aren’t easily accessible https://www.facebook.com/scotfoam/ and (ii) OVO Energy https://www.ovoenergy.com/guides/energy-guides/the-ultimate-guide-to-solid-wall-insulation.html.
• Glazing: Ah yes that old standby, you may already have it, but how old is it? If you don’t have it then maybe now is the time, or a cheaper alternative might be secondary double glazing, if the property is listed or in a conservation area.
• Energy Sources: Assuming your property isn’t a flat then maybe a miniature wind turbine, solar panels etc.
• But let's not forget the basics that people have known about for years. Draft proofing, new cladding on hot water tanks/pipes, increased loft insulation, programmable thermostats to turn things on/off, modern controls on radiators, energy efficient lighting. Sometimes lots of little changes can add up to one larger one.

A few final points:

• Firstly there is plenty of time.
• Bear in mind is that the areas of improvement with the highest EPC impact (in general terms) are insulation and heating.
• Beware of false economies by which I mean by this is don’t do this on the ‘cheap’ and get caught out, don’t pay money to move from an EPC G to an E and then several years later have to get more work done to get to EPC D. Look at the costings and, if it's viable, carry out the work in one hit.
• I can’t promise you the government won't ‘move the goal posts’ (there has been some talk of trying to get to EPC C, however, I think this is unrealistic given the age/type of some of the housing stock and that even some new builds struggle with this).
• There is lots of information and guidance available out there so take your time and do your research.

Watch out for further information on this in future posts on The Falkirk Property Blog.

www.thekeyplace.co.uk

#falkirk #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector 

Flats in Falkirk – worth a look over 7% yields with limited capital needed

I was talking to one of my landlords from Edinburgh the other week about the buy to let property market in Falkirk, when the subject of flats (properties not shoes – see picture!), and in particular whether they would make a good investment, came up.

He said that he was not keen on flats because he had heard people lose money on them in the past and, anyway, she wouldn’t want to climb stairs to a flat or suffer getting no peace in a flat as a result of noisy neighbours.  This is a reaction I have heard a few times so I thought that I would look into the buy to let flat market in Falkirk a bit further.

First of all, let’s take the personal stuff.  As with all buy to let investments, it’s about the returns you can make on the property rather than whether you would want to live in a property.  A flat wouldn’t be my first choice to live now but I was very happy living in flats when I was younger and, anyway, I am no longer renting. 

Secondly, let’s have a look at the financial stuff. 

There is a strong argument that buying a flat these days is not an issue as they are sensibly priced, the error people made in the past was buying them at the start of this century for more than the price of a house.

If you are a landlord with a limited budget, you can still find a decent property to let in Falkirk. Typically, a reasonably priced one bedroomed flat can be bought for around £55,000 in Falkirk – the average rent for this sort of property is likely to be around £385 per month so that’s a yield of over 8%.  A similar two bedroomed flat in Falkirk can be bought for around £80,000 and will also give you a yield of over 7% based on the average rent for these properties of around £475.  In either case, £55-80,000 is not that much for a buy to let property – assuming a 75% mortgage, that’s only £14,000 to £20,000 capital down to get a property.

We hope you find our posts useful.  If you want some advice on this property, another property you have in mind or anything else property related, come and see us in our office (6 Vicar Street, Falkirk) or call me (01324 469840) or email me (news@thekeyplace.co.uk).

www.thekeyplace.co.uk

#falkirk #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #prs #privaterentedsector

Buy to Let Limited Companies – should Falkirk landlords set them up?

Taking you back a wee bit in time, in November 2015 George Osborne disclosed plans to restrain the (BTL) market as he felt its growing attractiveness was leaving aspiring first time buyers contesting with landlords for the restricted number of properties on the market (and he also wantd to raise some more tax!).  One of things he brought in was that tax relief on BTL mortgages would be capped, starting in April 2017.  Before April 2017, a private landlord could claim tax relief from their interest on their BTL mortgage at the rate they paid income tax – (i.e. 20% basic, 40% higher rate and 45% additional rate).

So, for example, let’s say we have a Falkirk landlord, a high rate tax payer who has a BTL investment where the rent is £900 a month and the mortgage is £600 per month.  In the tax year just gone (2016/2017), assuming no other costs or allowable items …

• ·         Annual rental income £10,800.
• ·         Taxable rental income would be £3,600 after mortgage tax relief
• ·         Meaning they would pay £1,440 in income tax on the rental income

And assuming no other changes… the landlord would have income tax liability’s (at the time of writing September 2017) in the tax years of …

• ·         2017/18 –  £1,800
• ·         2018/19 – £2,160
• ·         2019/20 – £2,520
• ·         2020/21 –  £2,880

Landlords who are higher rate tax payers are going to have be a lot smarter with their BTL investments and ensure they are maximising their rental properties full rental capability.  However, there is another option for landlords.

The Falkirk landlords who own the 550 rental properties in the town could set up a Limited Company and sell their property personally to that Limited Company

In fact, looking at the numbers from Companies House – many landlords are doing this.  In the UK, there are 93,262 Buy To Let Limited Companies, and since the announcement in November 2015 – the numbers have seen a massive rise ....

• ·         Q2 2015 / Q3 2015 – 4,193 Buy to Let Limited Companies Set Up
• ·         Q4 2015 / Q1 2016 – 5,403 Buy to Let Limited Companies Set Up
• ·         Q2 2016 / Q3 2016 – 3,007 Buy to Let Limited Companies Set Up
• ·         Q4 2016 / Q1 2017 – 7,149 Buy to Let Limited Companies Set Up

So, by selling their buy to let investments to their own limited company, owned 100% by them, these landlords could then offset the costs of running their BTL’s as an ‘allowable expense’ – effectively writing off the cost of 100% of their mortgage outgoings, wear and tear and upkeep, letting agent’s fees etc.   

I am undeniably seeing more Falkirk landlords approach me for my thoughts on setting up a BTL limited company, so should you make the change to a limited company? 

In fact, I have done some extensive research with Companies House in the 15 months (1st January 2016 to 31^st March 2017) and a number of Buy To Let Limited Companies have indeed been set up in the EH26.

Well if you are looking to hold your BTL investments for a long time it could be very favourable to take the short-term pain of putting your BTL’s in a limited company for a long-term gain.  You see, there are huge tax advantages to swapping property ownership into a limited company but there are some big costs that go with the privilege.

As the law sees the new Limited Company as a separate entity to yourself, you are legally selling your BTL property to your Limited Company, just like you would be selling it on the open market. Your Limited company would have to pay Stamp Duty on the purchase and if you (as an individual) made a profit from the original purchase price, there could be a capital gains tax liability of 18% to 28%.  The mortgage might need to be redeemed and renegotiated (with appropriate exit charges).

On a more positive note, what I have seen though by incorporating (setting up the Limited Company) is landlords can roll up all their little buy to let mortgages into one big loan, often meaning they obtain a lower interest rate and the ability to advance new purchase capital.  Finally, if the tax liability is too high to swap to a limited company, some savvy buy to let investors are leaving their existing portfolios in their personal name whilst purchasing any new investment through a limited company?  Just an idea (not advice!).

It’s vital that landlords get the very best guidance and information from tax consultants with the right qualifications, experience and insurance.  Whatever you do, always get the opinions from these tax consultants in writing and you shouldn’t hurry into making any hasty decisions.  The modifications to BTL tax relief are being progressively eased in over the next three years so there is no need to be unnerved and rush into any decisions before finding out the specifics as they relate precisely to your personal situation, because with decent tax planning (from a tax consultant) and good rental / BTL portfolio management (which I can help you with)… whatever you do – let’s keep you the right side of the line!

For more advice and opinion on the Falkirk Property Market, visit the Falkirk Property Blog at www.thefalkirkpropertyblog.co.uk.

www.thekeyplace.co.uk

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